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Wednesday, 8 May 2013

Inflation only affects monetary items in financial statements



Inflation only affects monetary items in financial statements

The statement The effects of inflation in financial statements is a very common statement in accounting literature, international accounting standard setting, central banking research and in accounting in general.

Inflation only affects the real value on monetary items and nothing else. Inflation has no effect on the real value of non-monetary items. The stable measuring unit assumption affects the real value of non-monetary items.

What is intended with the statement The effects of inflation in financial statements is to state: The effects of (1) inflation on monetary items and (2) the stable measuring unit assumption on non-monetary items in financial statements.


Nicolaas Smith

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